PERSONAL FINANCE MODULE 2.pdf

Bicol University College of Business, Economics and Management Daraga, Albay Personal Finance A Modularized Instructional Material  Module 2 Personal Budgeting Introduction Welcome to the second module of our module for personal finance. The second module will provide the inputs for...

Bicol University College of Business, Economics and Management Daraga, Albay Personal Finance A Modularized Instructional Material  Module 2 Personal Budgeting Introduction Welcome to the second module of our module for personal finance. The second module will provide the inputs for budgeting. The module covers the following topics: types of budget plans, budget items---- income, expenses and net cash flow. Specific Learning Outcomes At the end of the module you are expected to: Understand the basic concepts of personal budgeting Familiarize the budget items for a budget plan Produce a simple personal budget plan Activity How will you react on the following data: Guide Questions: - What is your current practice for your spending? -Can you relate on the facts shown? https://blogs.worldbank.org/en/eastasiapacific/how- good-are-filipinos-with-their-finances Discussion Budgeting Budget. A budget refers to an estimation of income and expenses that's made for a specified future period of time. (Ganti, 2024) Budgeting. Budgeting refers to process of crafting plan for income generation and where to spend their income covering a specific period of time. Having a budget helps a person and household in managing their finances. Income Incomes refer to the expected money that you will received in a specific period of time. Expenses Expenses refers to the money that you spend over a specific period of time Net Cash Flow Net Cash Flow refers to the result when you subtract your expenses to your income. If the result is positive it means that you have more revenues generated compared to the expenses that you have incurred. If the result is negative it means that you incur more expenses that your revenues. The result of the subtraction will provide a good basis if you need to adjust on your activities especially on your spending. https://www.pzl.sg/blog/understanding-your-personal-cash-flow/ Common Steps in Budgeting 1. Estimate revenue, or what you expect to receive; 2. Estimate the present and future spending; 3. Deduct the estimated expenses to the revenues and determine the net cash flow. Types of Budget Plans Envelope Method This method categorize the main expenses. The money is placed inside an envelope. The envelope contains the maximum amount of money that you can spend for each of the category of your expenses. You cannot more than the amount in the envelope. If you will have an amount of money you cannot move the funds for other expenses. If there is money left you can put it into savings and do not use it next month. Zero- Based Budgeting The assumption in the allocation is that there will be no penny that will be left all of it is already assigned to specific expense or purpose. After determining the income, allocate every single penny to various purpose. 50-30-20 Method The allocation is 50% of income goes to “needs“; the 30% is for the “wants” and 20% will be for the savings and paying of debts if there are any. Pay yourself first The first thing that you do is to allocate for savings--- it means that you pay yourself. After this, you can now employ 20/50/30 budget. The 20 is now for savings and the 50 will be for needs and 30 for wants or you can use envelopes; or you can allocate all other revenue to other expenses after you have already allocated for savings. Values Based Budget The allocation will first consider the essentials or your needs. Then the allocation will now be allocated to the items that are deemed important to you such as charity, family, friends, education etc. You can use the other methods based on the values that determines your needs and wants. But always remember to include your future to meet your personal and financial goals. https://www.linkedin.com/pulse/what-budgeting- shruti-anand Behavior and Psychology of Spending https://www.facebook.com/bpi/photos/when-were-stressed-out-from-work-were-more-likely-to-splurge-on-dinners-drinks- d/573909855988524/?paipv=0&eav=Afb_QzdmIuQSPfxseauhlKz93UnZkeJIb1HAmaOW7G6H2Qwq9xrAIRu_2lzHCbjR5dU&_rdr Emotions and Spending A+B= C model +A Activating Event +B Belief____________ =C Consequences A- Activating Event Triggers emotions B- Belief how the A makes you feel C- Consequences refers to the response If the C is positive try to replicate If C is negative then try to analyze what are you doing; the goal is to control your emotions and response that would decrease negative consequences in the future. Think about your money and how your spend your money. Source: Bolton (2021) 11 Budgeting Myths 1. I Don’t Need to Budget 2. I’m Not Great at Math 3. My Job is Secure 4. Unemployment Insurance will tide me over 5. I Don’t Want to Deprive Myself 6. I Don’t Want Anything Big 7. I wont Qualify for Student Financial Aid 8. I’m Debt- Free 9. I always Get a Raise or Tax Refund 10. I Just Don’t Have the Discipline 11.It’s Luxury When I barely Have Enough for the Essentials https://elearningindustry.com/busting-myths-about-gamification-in-elearning Sample Budget Plan Format Sample Budget Application For our activity for this module, kindly prepare a draft budget plan for yourself for a week, month and a year. Please use the format we have just adjust the number of rows for the income/ expenses if you have more items to include. After you have prepared your budget plan kindly write down your realizations about the importance of budgeting. Here are some guide questions when you write your realizations: - What is the major income/ expense that you have? - How will the budget plan help you in attaining your financial goals? -How will you improve your current financial status based on your net cash flow? Note: your submitted document will be subjected to further screening e.g. plagiarism checker, AI generated content Let’s Try! Synthesis Budgeting aids us the opportunity to determine our status that could become our basis for next steps in attaining our financial goals.